how to get from sri to esg - maria custer
DESCRIPTION
TBLI CONFERENCE™ EUROPE 2012 - Zurich - SwitzerlandTRANSCRIPT
Performance creates trust
How to Get from SRI to ESG
Maria Custer Sigrist,Vontobel Asset Management
TBLI, 8 November 2012
Page 2
Sustainable investingWhat do we mean and why do we do it?
The world is changing rapidly and many sustainability challenges are ahead
PovertyHealth
problemsTraffic
congestionSocialsecurity
Greenspaces
Waste andpollution
Water andEnergy
ESG Integration Thematic Funds
Page 3
The problem with exclusion based SRILimits potential
� Limits the investment universe
� Restricts diversification
� Limits performance potential
� Restricts active ownership Excluded
CONTROVERSIAL ACTIVITIES NON-CONTROVERSIAL ACTIVITIES
Page 4
Benefits of an integrated approachFuture focused
� Identifies changes in policy & behaviour
� Fundamental research enhanced by sustainability perspective
� Allows greater analysis and interpretation
e.g. Pharma Co.
Specialist ESG Research provider Proprietary research
Environment:� Good regulatory control
Social:� Fines imposed due to bribes and pricing fraud� Good access to healthcare
Governance:� Progressive
Rating:� Below average
Environment� Agree it has high standards
Social� Violations for old cases - company now has new management, codes of conduct and control systems to prevent future incidents
Governance� One of best among peers
Rating:� Investable
Page 5
Developing an integrated approachKey issues
� No ‘one size fits all’
� Philosophy
� Strengths
� Resources
� Goals and expectations
Financial / investment
valueValues
One approach to integrating: target the overlap between value-driven and values-based investing
Page 6
A case study in integration (1)The Vontobel process
Fundamental and Financial Analysis In-House Sector ESG Analysis
Valuation Company ESG Minimum Standard
Minimum Standards Framework9 critical ESG factors, each scored from 0-10, or F (fail)
Average ESG Score >5 to be investableAny F score fails the entire rating
Average ‘G’ scoreAverage ‘S’ scoreAverage ‘E’ score
� Transparancy and appropriateness� Compensation models link to ESG� Independent compensation committee
� Responsible marketing� Health and content claims, labelling� Supplier monitoring
� Use of life cycle assessment� Ecological impact of products� Packaging reduction and recycling
Executive remunerationAdvertisingProducts
� Disclosure of structure � Anti-takeover devices � Founder privileges
� Code of conduct� Ethical policy� Human rights
� Emissions disclosure� Resource use policies
Shareholder rightsSocial & economic developmentSupply chain
� Independent diversified board� Separation of CEO and Chair� Independent auditors
� Fair compensation� Training, health & safety� Equality of recruitment
� Environmental considerationsintegrated into key processes� Systematic targets, monitoring
Board independenceEmployeesEnvironment Management System
GovernanceSocialEnvironment
Minimum Standards Framework9 critical ESG factors, each scored from 0-10, or F (fail)
Average ESG Score >5 to be investableAny F score fails the entire rating
Average ‘G’ scoreAverage ‘S’ scoreAverage ‘E’ score
� Transparancy and appropriateness� Compensation models link to ESG� Independent compensation committee
� Responsible marketing� Health and content claims, labelling� Supplier monitoring
� Use of life cycle assessment� Ecological impact of products� Packaging reduction and recycling
Executive remunerationAdvertisingProducts
� Disclosure of structure � Anti-takeover devices � Founder privileges
� Code of conduct� Ethical policy� Human rights
� Emissions disclosure� Resource use policies
Shareholder rightsSocial & economic developmentSupply chain
� Independent diversified board� Separation of CEO and Chair� Independent auditors
� Fair compensation� Training, health & safety� Equality of recruitment
� Environmental considerationsintegrated into key processes� Systematic targets, monitoring
Board independenceEmployeesEnvironment Management System
GovernanceSocialEnvironment
Page 7
A case study in integration (2)The Vontobel process
Minimum Standards Framework9 critical ESG factors, each scored from 0-10, or F (fail)
Average ESG Score >5 to be investableAny F score fails the entire rating
Average ‘G’ scoreAverage ‘S’ scoreAverage ‘E’ score
� Transparancy and appropriateness� Compensation models link to ESG� Independent compensation committee
� Responsible marketing� Health and content claims, labelling� Supplier monitoring
� Use of life cycle assessment� Ecological impact of products� Packaging reduction and recycling
Executive remunerationSupply chainProduct stewardship
� Disclosure of structure � No anti-takeover devices � Founder privileges
� Code of conduct� Ethical policy� Human rights
� Emissions and water use disclosure� Waste & resource use policies
Shareholder rightsSocial & economic developmentEco-efficient operations
� Independent nomination committee� Separation of CEO and Chair� Independent auditors
� Fair compensation� Training, health & safety� Equality of recruitment
� Environmental considerationsintegrated into key processes� Systematic targets, monitoring
Board accountabilityEmployee relationsEnvironment Management System
GovernanceSocialEnvironment
Minimum Standards Framework9 critical ESG factors, each scored from 0-10, or F (fail)
Average ESG Score >5 to be investableAny F score fails the entire rating
Average ‘G’ scoreAverage ‘S’ scoreAverage ‘E’ score
� Transparancy and appropriateness� Compensation models link to ESG� Independent compensation committee
� Responsible marketing� Health and content claims, labelling� Supplier monitoring
� Use of life cycle assessment� Ecological impact of products� Packaging reduction and recycling
Executive remunerationSupply chainProduct stewardship
� Disclosure of structure � No anti-takeover devices � Founder privileges
� Code of conduct� Ethical policy� Human rights
� Emissions and water use disclosure� Waste & resource use policies
Shareholder rightsSocial & economic developmentEco-efficient operations
� Independent nomination committee� Separation of CEO and Chair� Independent auditors
� Fair compensation� Training, health & safety� Equality of recruitment
� Environmental considerationsintegrated into key processes� Systematic targets, monitoring
Board accountabilityEmployee relationsEnvironment Management System
GovernanceSocialEnvironment
Page 8
ConclusionsGetting from SRI to ESG…
� A clear philosophy that is- based on sound principles, - relevant to today’s investors.
� A process that - reflects the philosophy- meets the specific needs of the investors- matches the resources- is continually challenged and improved – there is no 'holy grail‘.
Page 9
Disclaimer
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